Imperial Tobacco Group Ordinary 10p (IMT)

Company overview

The Group's core activity is the manufacture, marketing and sale of tobacco and tobacco related products. Imperial is the world leader in roll-your-own, rolling papers and tubes. Group's brands names include Lambert & Butler, Davidoff, Rizla, John Player, Navy Cut, Woodbine, Richmond, Golden Virginia, Embassy, Regal, Super Kings and many others. Trading in many markets around the world, the group is market leader in the UK and holds second place in Germany.

HL Comment (20 May 2008)

Imperial Tobacco was once part of the Hanson conglomerate empire before being given independence and floating on the London Stock Exchange back in 1996. The group currently manufactures the UK's top selling cigarette brand Lambert & Butler, along with the leading brand in the roll up tobacco products market, Golden Virginia. The group’s two key markets remain the UK and Germany, although the group has relatively recently branched out into both North America, additional areas of Continental Europe (Spain in particular) and Latin America via its acquisitions of both Commonwealth Brands and Altadis.

The group’s recent half year results (20May08) saw adjusted profits rising by 38pc to £918m, whilst adjusted earnings per share rose by 18pc to 72.4p per share. The group also confirmed details of its already flagged rights issue in order to pay for the Altadis acquisition - £4.9 billion is to be raised via a one new share for every existing two shares held at a price of 1475 pence, a 43.1pc discount based on the closing price as of 19th May. Cost saving synergies were raised to 460m euros (£365m) by 2012, whilst management confidence in the company’s outlook was expressed via a 14pc increase in the half year dividend.

Acting for negative investor considerations, half year results proved marginally short of some analysts' best expectations, the already flagged rights issue is nearer the top end of earlier management estimates and the shares have already enjoyed a stellar performance over the last 12 months - outperforming the FTSE-100 index by just under 24pc. Furthermore, a rights issue tends to satisfy any short-term institutional buying appetite for the shares. On the positive, cost savings, management confidence for the outlook reflected in the dividend hike, along with the company’s perceived defensive qualities, all combine to provide a current positive market consensus opinion.

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
30-09-2007	12,344.00	1,237.00	134.30	16.40	1.40	12.00	69.50	3.10
30-09-2006	11,676.00	1,168.00	122.20	14.60	1.60	9.00	62.00	3.50
30-09-2005	11,229.00	1,078.00	108.60	14.50	n/a	n/a	56.00	3.40
30-09-2004*	3,032.00	688.00	n/a	n/a	n/a	n/a	50.00	4.20
30-09-2003*	3,200.00	656.00	n/a	n/a	n/a	n/a	42.00	4.30

* Prior to 30th September 2005, figures were stated under UK Generally Accepted Accounting Principles (GAAP). Recent figures stated under International Financial Reporting Standards (IFRS).